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Trading 101: The 2019 Guide for New Traders

If you’re new to trading, you’ve come to the right place. AskTraders is here to help you succeed, no matter what financial instrument you choose. This guide is your introduction to online trading; you’ll find tips on finding your trading style, managing risk, choosing the right asset class, avoiding common mistakes, choosing the best broker, and the answers to any specific questions.

And at the end of the guide, there’s a section of helpful advice from professional traders to help you make more winning trades.

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Intro to online trading

Online trading technology has developed enormously in recent years; anyone with a computer or smartphone and an Internet connection now has the ability to invest and trade in stocks, bonds, Forex, crypto, ETFs, and derivatives. Of course, you need some money to seed your account — money you can afford to lose, especially if you plan to trade (higher risk) instead of investing.

When you have selected a broker (don’t forget to check our broker comparisons when you’re ready to open an account), you’ll be able to open a demo account. That’s an absolute must for novice traders; you can learn how to enter orders, follow prices in real time, and test out your trading strategy (more on that later).

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The difference between trading and investing

A lot of newcomers to online trading get confused about trading and investing. Both aim to profit off price movements in the financial markets, but the approach is completely different. Perhaps the most significant difference is that investors typically only make money from upward price movements, while traders will also short an asset and capture profit from a downward price trend.

Traders look for short-term profits. They may enter and exit multiple trades a day — even multiple trades a minute! Traders rarely hang on to an asset for more than a few weeks or months. They rely on technical analysis (read about top technical strategies in our Trading Strategies section) to time their trades.

Investors, on the other hand, are in it for the long term. Investors choose assets based on a combination of fundamental and technical analysis and look for those that will grow steadily over time. Investors are typically more risk-averse than traders. If you’re investing to reach long-term goals such as retirement savings, you’re better off with buy-and-hold assets such as stocks and bonds.

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What type of trader are you?

Since this guide is for online traders, the focus is on trading styles as opposed to investing styles (but if you’re interested in investments, check our AskTraders trading guide library for in-depth investing information).

There are four main types of trading styles:

  • Position trading. This is the trading style that most closely resembles investing, since position traders may hold a position for months. Position traders capture profit over a broad upward or downward trend and are less concerned with smaller daily price movements.
  • Swing trading. Swing traders hold positions for a period of days or weeks and use technical analysis to set entry and exit points for trades. This type of trading doesn’t require you to constantly monitor your trades, so it appeals to people who also work at a regular job during the day.
  • Day trading. Day traders don’t hold positions overnight; trades are opened and closed in a single day. Day traders may only hold a position for a period of minutes or hours, and they look to capture frequent, smaller gains. Most day traders trade on margin, so there’s definitely more risk involved.
  • Scalpers profit off tiny price movements and may make hundreds of trades in a single trading session. This is the riskiest type of trading because profit requires a much higher percentage of winning trades since the gains are so small. One or two losses could easily wipe out the profit from 10 or 20 winning trades. Most scalpers trade using leverage.

Looking at the four trading styles above, the level of risk increases as you move from position trading to scalping. When you decide to move from a demo account to a live account, be sure not to fund it with money that you need to meet your living expenses.

Avoid these novice mistakes… please

All traders make mistakes, even the most experienced ones; however, there are some missteps taken by novices that can be downright dangerous to their financial health. Do yourself a favour and familiarise yourself with the common mistakes so that you recognise them when you’re tempted to make them.

  1. Overestimating your abilities. You made a few good trades in your demo account so now you think you’re an expert. Beginner’s luck is not a sound trading strategy. Always do your homework and follow your trading plan every single time.
  2. Not following your trading plan. You don’t have one, you say? Then you’re relying on beginner’s luck. Before you go live, know how much you’ll trade, your entry and exit points, and your maximum acceptable loss.
  3. Not setting stops. Tight stops prevent big losses, and experienced traders use them. A variation of this mistake is cancelling a stop on a losing trade because you know in your gut it will turn around soon.
  4. Going overboard with leverage. New traders see margin as free money and common sense then goes out the window. Don’t use margin at all for the first six months or more until you’ve mastered your trading strategy and are winning more than you’re losing. (Need a new trading strategy? Check our Strategy section for tips).
  5. Flitting from market to market. Experienced traders become experts in their markets. You rarely find top traders jumping from stocks to Forex to crypto — pick one and get to know it well. You’ll be much more successful if you stick to one financial market.

Remember, you can always check our trading guides for help and advice, and if you still can’t find what you’re looking for, log into your AskTraders account and ask the Q&A community.

Ratgeberbilder Artikel Boerse

A word about our Trading Guides

When people talk about online trading, they are talking about a lot of different things. You’ll see terms like pips and spreads and Forex and derivatives and margin calls and breakouts… you get the idea.

And while some terms apply to all kinds of trading, others are specific to their market. It can become overwhelming when you’re trying to learn how to master a new skill.

That’s why AskTraders created a section devoted to in-depth guides taking you deep into every aspect of online trading. There’s information on tax issues, fees, and technological differences in the top trading platforms. You don’t need to muddle through on your own when you see something you don’t understand — turn to the trading guides.

Don’t forget Trading Strategies

While the trading guides give you all the basics for entering the world of online trading, the Trading Strategies section gets into the nitty-gritty of finding your own formula for winning trades.

Learn about technical analysis, charting, patterns, and how to develop a trading plan that accomplishes your goals. This is where to go when you’ve chosen your market, identified your style, selected a broker, and opened your demo account — when you’re actually ready to start developing and testing trading strategies.

And as always, AskTraders' Q&A community is there to answer your questions.

Plan to achieve your trading goals

What do you want to do as an online trader? Earn a little extra income? Replace the income from a full-time job? Create a financial cushion and then get out of the market?

You need to know what you want to accomplish before you create your plan.

What’s your trading timeline? Financial advisors help investors map out a strategy based on when they need access to their money; the same is true for traders.

Finally, know what you have for seed capital. Investors make regular deposits into their brokerage and use dollar cost averaging to buy stocks or ETFs on a periodic basis. Traders need seed money – a chunk of money they don’t need for other expenses or long-term goals – money they can afford to risk without harming their financial future.

Ratgeberbilder Artikel Trading-Apps

Practice makes perfect — use your demo account

In the old days, newbies to the market had to use paper trading to perfect their trading strategies. Today, demo accounts simulate the actual experience on a trading platform. It’s almost a necessity if you want to be successful when you go live.

Work out your trading plan, experiment with different trading strategies, and get comfortable with the platform before you go live. But do keep in mind — you may be in for a few shocks once you switch to a live account:

  • Demo accounts give you a lot more capital than you’ll probably be trading with in real life, at least at first. That simulated big balance is a great safety net that goes away when you’re trading with your own money. It can be hard to overcome that psychological barrier.
  • Execution is faster with demo accounts, so if you’re day trading or scalping, you may hit a string of losing trades at first because you’re accustomed to the speedier execution.
  • The emotional investment you have with your own money is missing with a demo account. In other words, it’s easier to stick to your plan with a demo account when greed and fear don’t feature in the experience.

Which market is right for you?

Choosing your market depends on many things: Your trading style, seed capital, and even the hours you’re available to trade. Here’s a quick look at the main markets to help focus your research. Remember, you can get detailed information about all the markets and instruments in the AskTraders trading guides:

  • Stock market. You can buy and short equities on exchanges all over the world. This is probably the most widely known and studied market.
  • ETF market. This is a variation on the stock market. These are funds that trade like shares and are suitable for trading or investing.
  • Options market. Options are derivatives, which means you don’t actually own the underlying asset. Options can be pegged to many different instruments—stocks, commodities, Forex, futures, and crypto.
  • CFD market. This is a hybrid derivative that enables traders to make money on price movements of an underlying asset.
  • Forex market. This is the largest financial market in the world. You are trading on price movements in a currency pair. Forex is always traded in pairs.
  • Crypto market. Crypto is a high-risk digital currency that has no intrinsic value. It’s not pegged to gold or other commodities and it is not recognised as legal tender.

Day traders favour Forex and CFDs because of the high leverage and low account minimums. ETFs are another popular target with day traders and even scalpers. Long-term investors tend to stick with stocks and ETFs.

Trading is a skill

Although outsiders view the market as a mixture of magic and myth, the truth is that trading is a skill that anyone can learn. The way to succeed is to treat it like a profession, even if you’re only trading on the side.

Start with the basics:

  • Price movement and the difference between the bid and ask prices (spreads)
  • Different order types and when to use them
  • How to manage your risk
  • When you can trade the different exchanges

From there, move into “advanced basics,” which are the building blocks to a trading strategy that works for you. Here’s where you dive into technical analysis, charting skills, and how to match a trading method to your own personality type and objectives.

Again, AskTraders' trading guides and trading strategies are there to help you find your way—but don’t be afraid to buy books, sign up for webinars, or even have a one-on-one with a professional trader.

When you move into your demo account, keep one thing in mind – you don’t need to win every trade to have a successful career as a trader. Losses are part of the job — just make sure you’re using stops to keep them from being catastrophic.

Finding the right broker

If you haven’t figured it out by now, your choice of a broker is the single most important decision you’ll make when you become an online trader.

Why? Let’s start with the trading technology itself. If the order entry process is cumbersome or the execution is slow, you’ll have a very hard time carrying out a disciplined trading plan. And if you can’t trade on the devices you use the most, it’s not going to be a productive relationship.

Then let’s look at fees. A scalper or day trader needs low commissions given the huge number of trades being executed. Forex and CFD traders need tight spreads, and all serious traders need access to research and charting tools. If your broker doesn’t offer reasonable rates for essential extras, your overall rate of return can be less due to high charges.

Finally, support and education are key. If you don’t have a demo account to test out new strategies, or good customer support when something goes wrong, you’re missing out on key components in the trader-broker relationship.

AskTrader broker comparison tool

Don’t leave your broker search to chance. Use the AskTrader broker comparison to help you identify the best brokers in your chosen market — and then compare essential features and fees. You could spend hours on the Internet looking for information yourself, but why would you when AskTraders has already done the work?

1
of 29 Forex Broker HYCM
Currency pairs 69 Currencies
Max. Lever 1:500
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 29 Forex Broker ETFinance
Currency pairs Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 29 Forex Broker Tickmill
Currency pairs 60 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 29 Forex Broker ITRADER.com
Currency pairs 50 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 29 Forex Broker GMO Trading
Currency pairs 60 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 ETF Broker IG
ETFs w/ discount 1200
Custody fee 0 GBP
Min. deposit £ 0
Trading from 5 GBP
Go to Broker

74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

2
of 6 ETF Broker Fidelity
ETFs w/ discount 93
Custody fee 0 GBP
Min. deposit £ 2.500
Trading from 25 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 ETF Broker AJ Bell Youinvest
ETFs w/ discount 0
Custody fee 0 GBP
Min. deposit £ 0.00
Trading from 1,50 GBP
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 ETF Broker Bestinvest
ETFs w/ discount 216
Custody fee 0.4% annually
Min. deposit £ 500
Trading from 0 GBP
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 ETF Broker DEGIRO
ETFs w/ discount 740
Custody fee 0 GBP
Min. deposit £ 0
Trading from 1,75 GBP + 0,004%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 10 Stock Broker eToro
National fees £0.00
Custody fee £0.00
Intl. fees £0.00
Dep. Protection £50.000
Go to eToro
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 10 Stock Broker Interactive Investor
National fees £7.99
Custody fee £9.99 monthly
Intl. fees £7.99
Dep. Protection 50.000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 10 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection £50000
Go to Broker

74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

4
of 10 Stock Broker Calamatta Cuschieri
National fees £ 7.50
Custody fee £ 0.00
Intl. fees £ 7.50
Dep. Protection 100.000€
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 10 Stock Broker Hargreaves Lansdown
National fees 11,95 £
Custody fee 0,00 £
Intl. fees 11,95 £
Dep. Protection 50.000 £
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 28 CFD Broker HYCM
FTSE spread 20 Points
Dep. Protection £ 50.000
Max. Lever 1:500
Min. deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 28 CFD Broker ETFinance
FTSE spread 1 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit $/€/£ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 28 CFD Broker ITRADER
FTSE spread 1 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 28 CFD Broker GMO Trading
FTSE spread 1 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 28 CFD Broker City Index
FTSE spread 1.0 Point
Dep. Protection £ 85.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 17 Crypto Broker eToro
Crypto currencies 10
Max. Lever 1:2
Min. deposit $ 200
BTC spread 1,50%
Go to eToro
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 17 Crypto Broker ETFinance
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 250
BTC spread 1%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 17 Crypto Broker ITRADER
Crypto currencies 33
Max. Lever 1:2
Min. deposit £ 250
BTC spread Floating
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 17 Crypto Broker GMO Trading
Crypto currencies 33
Max. Lever 1:2
Min. deposit $ 100
BTC spread varied
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 17 Crypto Broker IQ Option
Crypto currencies 15
Max. Lever 1:2
Min. deposit $ 10
BTC spread 6 percent
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 7 Social Trading Broker eToro
Underlying assets 866
Dep. Protection 50.000
Min. deposit £ 200
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 7 Social Trading Broker ZuluTrade
Underlying assets 200
Dep. Protection
Min. deposit £ 0
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 7 Social Trading Broker Ayondo
Underlying assets 90
Dep. Protection 1000000
Min. deposit £ 2000
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 7 Social Trading Broker Tradeo
Underlying assets 122
Dep. Protection 20000
Min. deposit £ 250
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 7 Social Trading Broker FXTM
Underlying assets 247
Dep. Protection 20000
Min. deposit £ 10
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 9 Spread Betting Broker City Index
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:20
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Spread Betting Broker FX Pro
FTSE spread 1.5 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Spread Betting Broker IG
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker

74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

4
of 9 Spread Betting Broker Core Spreads
FTSE spread 0.8 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 10
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 9 Spread Betting Broker OANDA
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to broker
Risk warning: Capital can be lost. Terms and conditions apply.

Community is key

Connecting with like-minded traders enriches your trader education and keeps you on track to meet your goals. Just as you need mentors and friends in your nine-to-five professional life, you also need mentors and friends to help you succeed in your trading career.

Online trading is a unique ecosystem with its own language, maxims, and conventional wisdom. When you’re on the outside looking in, it seems incomprehensible. All traders — novice and experienced alike — benefit from a supportive community of traders to share their experience and help sharpen their strategy.

The AskTraders community serves its purpose as a guide, mentor, teacher, and friend. Whether you’re into forex or crypto, scalping or swing trading, you’ll find someone in the community to share your experience.

Conclusion:

The AskTraders advantage

AskTraders has all the latest news, information and expert opinions and we can assist even experienced traders to be more successful. Whether you’re looking for information about a financial market (check our trading guides) or how to choose the right broker (our Broker Comparison makes it easy to choose the right broker for you), you’ll find everything you need at AskTraders.

And we don’t abandon you once you choose a market and a broker — we’re here every step of the way. Need help developing a solid trading strategy? Our Trading Strategy library is packed with information to help you make winning trades.

Once you’re dialed into a market and have set a strategy, our News section keeps you up to date on what’s happening in the financial world and how it might affect your trades.

Never underestimate the power of community. The AskTraders community includes professional traders, financial experts, and people who know the markets inside and out. Browse our articles, written by pros who make their living trading online, for tips on how to succeed as a trader.

And if you can’t find what you need, our active Q&A community is there to help. Ask questions when you’re starting out — and share your own knowledge and experience as you progress through your trading career.

Online trading can help you achieve your financial goals if you follow a carefully constructed plan. AskTraders is here to help you every step of the way.

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